Compiled Statement GAAP Supplement

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Accounts receivable:

No allowance for uncollectable accounts is necessary at December 31, 1999.

Inventories:

Inventories are valued at the lower of cost (first-in, first-out method) or market.Inventory is
comprised primarily of raw materials.

It was determined that an inventory write-down was appropriate under GAAP for certain inventory
components.As a result, all of the Company's BD465 space heating inventory was written down
to zero.A charge of $23,240 was incurred as a promotional expense during 1999.This model of
space heaters is being replaced and the remaining inventory is useful only as a promotional device
(contests, gifts, etc).A charge of $1,787 was also incurred as an R&D expense during 1999 for
inventory used in the development of the GB-Series ventilation-space heating prototypes.

Furniture and equipment:

Furniture and equipment is recorded at cost, less accumulated depreciation.Depreciation is
provided on a straight-line basis over the estimated useful life of three to seven years.

Patent:

The Company has capitalized costs related to acquiring a patent, which are being amortized using
the straight-line method over 9.5 years.All other patent costs are expensed as incurred.

Customer list:

The Company has capitalized costs related to acquiring a customer list, which are being amortized
using the straight-line method over 7 years.

Other liabilities:

The Company has credit cards payable, which are backed by the personal guarantee of an officer.

Research and development:

Research and development costs are charged to operations as incurred and totaled $12,416 for
1999.

Stock based compensation:

In 1995, the Financial Accounting Standards Board issued SFAS No. 123,Accounting for Stock-
Based Compensation.As permitted by this Standard, the Company will continue to measure
compensation cost using the intrinsic value-based method of accounting prescribed by the
Accounting Principles Board (APB) Opinion No. 25,Accounting for Stock Issued to Employees.

Stock issuance costs:

The Company has recorded prepaid stock issuance costs for legal and other expenses incurred in
connection with its stock offering.During 1999, $6,525 of prepaid stock issuance costs has been
deducted from the proceeds directly related to issuance of common stock.Additional prepaid stock
issuance costs will be deducted from future proceeds related to stock issuance, or expensed against
net income only to the extent that future proceeds derived from issuing the stock do not exceed total
prepaid stock issuance costs.

Stock notes receivable:

The Company received its two stock notes receivable, which were recorded on the Company’s
Balance Sheet as a reduction in stockholder’s equity in 1998. At December 31, 1999, the balance